Why Amazon would open a breed of stores that has been dying off for years

• Amazon is reportedly opening a series of department stores in Ohio and California.
• Critics have long predicted the death of department stores, but this is a savvy decision by Amazon.
• It enables Amazon to showcase its products, reach new customers, and better compete with Walmart.

Department stores once accounted for 10% of retail sales, and now they account for less than 1%.

In their heyday, they were the traffic-driving engines of shopping malls, occupying the giant spaces at mall entrances that helped adjacent smaller chains thrive. But over the years, a combination of factors including over-expansion, shifting spending habits, and the rise of e-commerce drove shoppers away from department stores. As these stores struggled, they took down hundreds of malls with them.

Now, many of the hulking spaces department stores once occupied stand hollow or have been razed to the ground to make way for apartment buildings or co-working spaces. So why is Amazon reportedly planning to open a chain of department stores?

There are six key reasons that make this a savvy strategy for Amazon.

1. These stores would allow Amazon to showcase categories of products like home goods and apparel that customers may not associate with the tech giant as readily as items like batteries and light bulbs.
2. They would enable customers to see and touch items in person that they might not want to buy online. Despite the accelerated adoption of online shopping amid the pandemic, a large majority of retail sales still happen in stores.
3. Amazon can strategically open stores in areas that already have high foot traffic away from traditional shopping malls. Off-mall department stores including Kohl's and Ross Stores have been faring better in recent years than many mall-based outlets, such as Sears and Lord & Taylor.
4. Amazon can keep overhead costs lower than traditional department stores by opening smaller stores. Amazon is considering opening department stores that are roughly 30,000 square feet, according to the Journal. By comparison, the traditional department store is 100,000 to 150,000 square feet.
5. Amazon could use the stores as mini logistics centers to help fill online orders or take customer returns.
6. If successful on a larger scale, the stores could help Amazon better compete with one of its main rivals, Walmart, whose key advantage over Amazon is its massive physical footprint.